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GLOBAL
MARKETS
Slide 6.2
International trade is booming Number of multinational corporations in the 14 richest countries has more than tripled. These companies control one third of all private-sector assets and world sales of $6trillion. World trade now accounts for 29% of world GDP.
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A Global Industry is an industry in which the strategic positions of competitors in major geographic & national markets are fundamentally affected by their overall global positions. A Global Firm is a firm that operates in more than one country & captures R&D, production , logistical, marketing & financial advantages in its costs & reputation that are not available to purely domestic competitors.
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Assessment of the global marketing environment Deciding whether to go international Deciding which markets to enter How best to enter those chosen markets Developing the global marketing programme Deciding upon the structure of the global marketing organisation
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Traditional Motivation Key suppliers Seeking new markets Lower cost of production New Motivation Ballooning R&D investments Shorter production life cycle
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Risks when going abroad... Most companies would prefer to remain domestic businesses Major concerns of going abroad: Unstable governments Foreign-exchange problems Foreign-government entry requirements and bureaucracy Tariffs and other trade barriers Corruption Technological Pirating High cost of product and communication adaptation
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Company must also decide on the types of countries to consider Pre-selection of highest potential markets (candidate selection) Therefore, it has to analyse: Market potential (macro-economic view) Foreign country strategy
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2. Deciding which Markets to Enter Slide 6.10 Analysis of Foreign Country Strategy (Phase 2)
Info needed for this analysis: Consumer decision making process Use of product Who buys? When? Why? Where? How often? Competitor analysis Barriers of entry? PLC analysis Product launch possible in appropriate stage of foreign country`s PLC?
Slide 6.11
Companies need to understand the international marketing environment thoroughly. Unprecedented global growth, increased complexities and volatility of international markets especially the emergent markets such as Africa, Asia and South America.
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Tariffs
levied on certain products, designed to raise revenue and protect domestic markets.
Limit on product categories to conserve foreign exchange and protect local industry and employment. Imposed to limit foreign exchange with other countries and on its exchange rate against other currencies.
Quota systems
Exchange controls
Slide 6.13
promote world trade by reducing tariffs and other international trade barriers.
Slide 6.14
Regional free-trade zones: Groups of nations organised to secure common international trade goals
European Union (EU)
25
member states (April 2004) Approx 450 million consumers Diverse cultures, languages and economic strength
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Regional free-trade zones: Groups of nations organised to secure common international trade goals
North American Free Trade Agreement (NAFTA)
USA,
Canada and Mexico 360 million people $6.7 trillion market Talks in progress to form the Free Trade Area of the Americas (FTAA)
Slide 6.16
MERCOSUR
Argentina,
Regional free-trade zones: Groups of nations organised to secure common international trade goals
Chile More than 200 million population $1 trillion market Paraguay, Uruguay, Bolivia, Brazil,
Economic factors reflect the attractiveness of the market: industrial structure and income distribution.
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Industrial structure:
Subsistence
Industrial
economies
Economic factors reflect the attractiveness of the market: industrial structure and income distribution.
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Income distribution:
Low
income distribution in subsistence economies Medium income in raw material exporting countries and industrialising economies High income in industrial economies
Slide 6.19
Political-legal environment
Attitudes towards international buying Government bureaucracy Political stability Monetary regulations
Counter
trade
Bartering
Compensation
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Cultural environment
The learned distinctive way of life of a society based upon the basic values, perceptions, wants and behaviours learned by a member of society from the family and other important institutions.
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Occasional exporting Active Exporting Indirect Exporting Domestic based export merchants Domestic based export agents Trading companies Co operative organizastions EMCs
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Domestic based export deptt. or division Overseas sales branch or subsidiary Traveling export sales representatives Foreign based distributors or agents
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The international company (= licensor) agrees to make available to another company abroad (=licensee) use of its patents and trademarks, its manufacturing know-how, its trade secrets and its managerial and technical services. The foreign company agrees to pay the licensor a royalty or other form of payment
Slide 6.26
Pros: A way of getting a foothold in a foreign market without a large capital investment most attractive to firms that are new to the international business area fewer exchange rate risk circumvent trade barriers (e.g. no duties) circumvent production restriction in the domestic market test foreign markets
Slide 6.27
Another form of licensing Usually: a company initially establishes a brand name for its products, service, quality etc. in the home market and a standardized business system to operate the business. It then franchises the entire business system in a foreign country Examples: McDonalds, Pizza Hut, Dominoes
Slide 6.28
Foreign investors join local investors to create a JV Shared ownership and control JVs often necessary or desirable for economic or political reasons Characteristics: Direct control of distribution channels: company owned points of sales International business is critical part of headquarter strategy Joint ownership may lead to management conflicts
Slide 6.29
Direct ownership of foreign-based assembly or manufacturing facilities Advantages: Cost economies (e.g. cheaper labor or raw materials, freight savings) Better relationship with foreign government, customers, local suppliers, etc. Full control of marketing mix Disadvantages: Country-specific economic and political risks Investment (also in time and education)
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After deciding HOW to enter the market: WHEN should the selected markets be entered? Two strategies: sprinkler approach waterfall approach
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Advantages of the Waterfall-approach possibility to grow with its foreign business in terms of organization and resources less resources required than with the sprinkler approach less risky than the sprinkler approach extension of the product life cycle
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Companies must decide how much to adapt their marketing to local conditions Two Extremes Standardized marketing worldwide Differentiated marketing (adjustment to each target market)
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marketing strategy for using the same marketing mix in all the companys international markets.
marketing strategy that adapts the marketing mix elements to each international target market.
Adaptation
International
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Slide 6.38
STRATEGIES
C O
PRODUCT
M
M U
Do not change product Do not change communications Adapt communications Straight extension
N
I C A T I O N
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Straight Product
no adaptation: Coca-Cola Adapted to meet local needs or wants in the market: mutton used in burgers in India Specifically designed and made for the new market Marketing messages adapted to the local market
Product
Communication
Dual
strategy
Marketing message and the product are changed to meet the needs of the consumers in the international market
Slide 6.41
Global Branding
Understanding similarities & differences in the global branding landscape Do not take short cuts in brand building Establish a marketing infrastructure Embrace IMC Establish brand partnerships Balance Standardization & Customization Balance global & local control Establish operable guidelines Implement a global brand equity measurement system Leverage brand elements
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Slide 6.43
Barriers to Standardization Legal barriers: prohibition of comparative advertising, prohibition of advertising for certain products, prohibition of foreign languages in advertising Technological barriers: media diffusion Linguistic barriers: knowledge of foreign languages, understanding and interpretation of words, symbols, color and music Image barriers: link between media characteristics and product quality Consumption patterns: media usage Competitive situation: e.g. average advertising budget, cost for media, typical forms of communication
Slide 6.44
Determinants of international pricing Internal determinants international organizational structure cost structure way of transfer pricing decisions on other parts of the marketing mix External determinants political, legal and economical framework behaviour and preferences of customers competitive structure and behaviour exchange rate volatility occurrence of gray markets
Slide 6.45
Price escalation
Transfer pricing
Dumping
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Slide 6.47
Organisation needs to adopt a whole-channel concept for international distribution and marketing.
Seller-> Sellers Headquarters organisation for international marketing->Channels between nations->Channels within nations->Final user or buyer.
Based upon local knowledge and expertise as well as customer base and robustness of the existing marketing channels.
Slide 6.48
Export department
Comprises a sales manager and a few assistants whose job is to organise the shipping out of the products to foreign markets. Division handles all of the firms international activities.
Corporate management and staff plan worldwide operational and marketing policies, financial flows and logistical systems.
International division
Global organisation